Feb 12, 2019

The case for a higher minimum wage

Dion Rabouin, author of Markets

The one thing that could change the low-pay, low-inflation dynamic, AFL-CIO's chief economist Bill Spriggs argues, is government intervention.

What he's saying: "Firms have decided, 'Why do I need to give you more than a 1 or 2% raise? The prices are running 1–2% higher, what's your problem?' The other problem we have is low inflationary expectations make it very hard to re-inflate the economy — you just can’t get out of the rut."

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Data: Federal Reserve Bank of St. Louis; Chart: Axios Visuals

One side: There are strong arguments against minimum wage increases. Surveys like this one co-authored by a member of the conservative American Enterprise Institute highlight the fact that in states that raised the minimum wage by at least $1, wages for low-skilled workers fell.

The other side: After 40 years of no increase in real wages, even with cost-of-living fluctuations, Americans seem willing to take that risk. Ten states began 2019 with voter-backed minimum wage increases, joining 11 states that saw legislation to increase their minimum wage in 2018, and 12 states that raised the minimum wage through legislation the year prior.

Go deeper: All calm on the wage front

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